On August 5, 2004, the United States signed the
Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR)
with Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and
Nicaragua. The agreement will provide America’s farmers, ranchers, food
processors, and the businesses they support with improved, and in many cases,
new access to this growing regional market of 44 million consumers. The CAFTA-DR
calls for eventual duty-free, quota-free access on essentially all products, and
addresses other trade measures among the parties as well. Under the existing
terms of the Caribbean Basin Initiative, which the CAFTA-DR replaces, nearly all
agricultural exports from the CAFTA-DR countries to the United States already
receive duty free treatment. The CAFTA-DR levels the
playing field, providing U.S. exporters market access that is better than, or at
a minimum equal to, that given to other competitor countries.
U.S. Gains Improved Access to the Dominican and Central American Dynamic
U.S. soybeans and meal enter the Dominican Republic, El
Salvador, and Honduras duty-free, but face applied import tariffs of 1 to 5
percent in the other three countries. The WTO permits tariffs as high as 91
percent on soybeans and 60 percent on soybean meal that could have been
re-imposed on U.S. exports. From 2002 through 2004, U.S. suppliers annually
shipped on average 203,359 metric tons (mt) of soybeans and 640,770 mt of
soybean meal valued at $50 million and $140 million respectively to all six
countries combined. In 2004, the U.S. share of CAFTA-DR import markets for
soybean and soybean meal was 88 and 81 percent respectively.
Costa Rica applies import tariffs of 1 and 5 percent on
soybeans and soybean meal, respectively.
El Salvador does not impose an import tariff on soybeans
or soybean meal, but the WTO permits tariff rates of 20 percent on each.
Guatemala applies a 5 percent tariff on soybean meal
imports, but does not have an import tariff on soybeans. However, Guatemala is
permitted to establish tariff-rate quotas (TRQs) under the WTO for soybeans and
soybean meal with out-of-quota tariffs of 91 percent and 40 percent
Honduras does not impose an import tariff on soybeans or
soybean meal, but the WTO permits rates of 35 percent on each.
Nicaragua does not impose an import tariff on soybeans,
but does apply a 5 percent tariff on soybean meal. The WTO permits rates of 60
percent on each.
The Dominican Republic does not maintain import tariffs on
soybeans or soybean meal. The WTO permits tariffs of 40 percent on each.
After CAFTA-DR. . .
U.S. soybean and soybean meal exports gain
preferential access as tariffs are immediately eliminated for the Dominican
Republic, El Salvador, Guatemala, Honduras and Nicaragua. In the case of Costa
Rica, soybean tariffs are immediately eliminated, and soybean meal tariffs will
be eliminated over 15 years.
U.S. Consumers Benefit
Before CAFTA-DR. . .
U.S. soybean and soybean meal imports from all six countries
entered duty-free. From 2002 through 2004, only Nicaragua exported soybeans (100
mt in 2002) to the United States. None of the CAFTA-DR countries currently
export soybean meal.
After CAFTA-DR. . .
CAFTA-DR countries will lock-in zero duties on soybean and soybean meal exports
to the United States.